[2019] 1 LNS 2281 Legal Network Series

DALAM MAHKAMAH RAYUAN MALAYSIA

[BIDANG KUASA RAYUAN]
[RAYUAN SIVIL NO: W-02(NCVC)(W)-1457-07/2017]

ANTARA

PERBADANAN PENGURUSAN 3 TWO SQUARE

… PERAYU

DAN

1. 3 TWO SQUARE SDN BHD

(NO SYARIKAT: 612273-X) … RESPONDEN
PERTAMA

2. YONG SHANG MING

(NO KP: 830418-14-5999) … RESPONDEN
KEDUA

[Dalam Mahkamah Tinggi Malaya Di Kuala Lumpur

Bahagian Sivil

Guaman Sivil No: 22NCVC-586-10/2013

Antara

3 Two Square Sdn Bhd

(No. Syarikat: 612273-X) … Plaintif

Dan

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1. Perbadanan Pengurusan 3 Two Square

2. Foo Ann Wan (No. KP: 560405-01-5856)

3. Hooi You Von (No. KP: 601031-07-5624)

4. Loh Kim Tong @ Wong Ah Wah (No. KP: 511102-71-5133)

5. Lim E @ Lim Hoon Nam (No. KP: 440619-01-5424)

6. Tan Ching Wei (No. KP: 710416-10-5876)

7. Ong Poo Lian (No. KP: 480818-10-5876)

8. Dr. Abdul Aziz Bin Hj Kechil (No. KP: 470606-07-5127)

9. Ir. Yap Yee Hock (No. KP: 640221-06-5031)

… Defendan-
Defendan

Dan

Yong Shang Ming

(No. KP: 830418-14-5999) … Pihak Ketiga]

(DI DENGAR BERSAMA DENGAN)

DALAM MAHKAMAH RAYUAN MALAYSIA

[BIDANG KUASA RAYUAN]
RAYUAN SIVIL NO: W-02(NCVC)(W)-1460-07/2017

ANTARA

3 TWO SQUARE SDN BHD

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[2019] 1 LNS 2281 Legal Network Series

(NO SYARIKAT: 612273-X) … PERAYU

DAN

1. PERBADANAN PENGURUSAN 3 TWO SQUARE

2. FOO ANN WAN (NO. KP: 560405-01-5856)

3. HOOI YOU VON (NO. KP: 601031-07-5624)

4. LOH KIM TONG @ WONG AH WAH (NO. KP: 511102-71-

5133)

5. LIM E @ LIM HOON NAM (NO. KP: 440619-01-5424)

6. TAN CHING WEI (NO. KP: 710416-10-5876)

7. ONG POO LIAN (NO. KP: 480818-10-5876)

8. DR. ABDUL AZIZ BIN HJ KECHIL (NO. KP: 470606-07-

5127)

9. IR. YAP YEE HOCK (NO. KP: 640221-06-5031)

… RESPONDEN

[Dalam Mahkamah Tinggi Malaya Di Kuala Lumpur

Bahagian Sivil

Guaman Sivil No: 22NCVC-586-10/2013

Antara

3 Two Square Sdn Bhd

(No. Syarikat: 612273-X) …Plaintif

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Dan

1. Perbadanan Pengurusan 3 Two Square

2. Foo Ann Wan (No. KP: 560405-01-5856)

3. Hooi You Von (No. KP: 601031-07-5624)

4. Loh Kim Tong @ Wong Ah Wah (No. KP: 511102-71-5133)

5. Lim E @ Lim Hoon Nam (No. KP: 440619-01-5424)

6. Tan Ching Wei (No. KP: 710416-10-5876)

7. Ong Poo Lian (No. KP: 480818-10-5876)

8. Dr. Abdul Aziz Bin Hj Kechil (No. KP: 470606-07-5127)

9. Ir. Yap Yee Hock (No. KP: 640221-06-5031)

… Defendan-
Defendan

Dan

Yong Shang Ming

(No. KP: 830418-14-5999) … Pihak Ketiga]

CORAM

MARY LIM THIAM SUAN, JCA

HAS ZANAH MEHAT, JCA
VAZEER ALAM MYDIN MEERA, JCA

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JUDGMENT OF THE COURT

In the High Court

[1] The Plaintiff, 3 Two Square Sdn Bhd, was the developer of a
mixed strata development known as “3 Two Square”, consisting of six
commercial blocks, namely Block A to Block F. The Plaintiff retained
ownership of all the strata parcel units comprised in Block F, and sold
the remaining strata units in Blocks A to E to various parcel owners.
Block F was also known as “Crest Tower”. The Plaintiff instituted the
High Court action in its capacity as parcel owner of all the strata units
in Crest Tower.

[2] The 1 st Defendant, Perbadanan Pengurusan 3 Two Square, is the

management corporation for 3 Two Square (“Management
Corporation”), established by operation of law pursuant to the
provisions in the Strata Titles Act 1985 (“STA”) which was then in
operation and since replaced by the Strata Management Act 2013.

[3] The 2 nd to 9 th Defendants were at the material time council

members of the Management Corporation.

[4] The Third Party, being a director of the Plaintiff, was also at the
material time a council member of the Management Corporation. The
2 nd to 8 th Defendants, with leave of court, brought third party
proceedings against the Third Party seeking indemnity and
contribution in the event that the 1 st to 8 th Defendants were held liable
to the Plaintiff.

[5] The Plaintiff asserted that the 1 st Defendant, as the Management

Corporation, and the 2 nd to 9 th Defendants, as council members of the
Management Corporation, are pursuant to the STA and the Building
and Common Property (Maintenance & Management) Act 2007
(“BCPA”) obliged to maintain and upkeep in good proper working

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condition the common property in 3 Two Square. The Plaintiff

contended that the responsibility for the maintenance of these
common areas and facilities lay with the Management Corporation.

[6] The Plaintiff further alleged that in breach of its aforementioned

statutory obligations, the Defendants failed to maintain and upkeep
some of the common property in a good state of repair and operation,
namely:

(a) failed to maintain the lifts in Crest Tower;

(b) failed to maintain the central cooling system in Crest Tower;

(c) failed to maintain and clean the toilets in Crest Tower;

(d) failed to maintain the common property leading to and

surrounding the car parks in the basement car park area;

(e) failed to maintain the stairways and other common

areas/property in Crest Tower;

(f) failed to maintain and take care of the landscaping in the area
surrounding Crest Tower;

(g) failed to clean the windows and façade of Crest Tower; and

(h) failed to maintain the common property within the carpark areas
leading to flooding and ponding in the basement carpark.

[7] The Plaintiff claimed that arising from the aforesaid breaches of
statutory duties, it has suffered losses, as follows:

(a) loss of rental arising from the failure to rent, or failure to renew
tenancy agreements for parcel units owned by the Plaintiff in
Crest Tower amounting to RM3,658,176.00;

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(b) loss of rental from a prospective tenant who refused to take up

tenancy within Crest Tower amounting to RM1,562,346.00;

(c) loss of profits from car parks in the sum of RM200,200.00;

(d) expenses incurred in maintaining the central cooling tower

which is essential for the central air conditioning system in the
sum of RM19,410.00;

(e) expenses inc urred to engage a contractor to maintain and clean

the public toilets in Crest Tower from 1.1.2013 to 31.10.2013
amounting to RM37,355.40; and

(f) the cost of maintaining the common properties within the car
park of Crest Tower amounting to RM2,900.00.

[8] The Plaintiff further alleged that the 2 nd to 9 th Defendants had

breached their fiduciary duty to the Plaintiff by misusing the
Management Corporation’s sinking fund by making payment out of
this fund for certain repair and maintenance works without these
expenditures being approved by a special resolution at a general
meeting of the Management Corporation. These payments were
instead approved at weekly meetings of the management council
attended by some and not all council members. The Plaintiff states
that payments out of the sinking fund can only be made upon being
approved by a special resolution as stipulated in s. 46 of the STA and
hence seeks an order that monies utilized from the sinking fund for
these repair and maintenance works be repaid by the 2 nd to 9 th
Defendants to the Management Corporation.

[9] The Plaintiff sought to make the 2 nd to 9 th Defendants personally

liable for what it contended were breaches of duty by the Management
Corporation, claiming that these defendants were in breach of not only

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their statutory duties but also their fiduciary duties owed to the
Plaintiff.

[10] Wherefore, the Plaintiff claimed the following reliefs:

(a) a mandatory injunction requiring the 1 st Defendant, as the

Management Corporation, and the 2 nd to 9 th Defendants, as
council members of the Management Corporation, to carry out
their statutory and fiduciary duties and obligations and properly
maintain all common property including the following:

(i) the lifts in Crest Tower;

(ii) the central cooling tower in Crest Tower;

(iii) the public toilets in Crest Tower;

(iv) the façade of Crest Tower including the glass windows;

(v) the landscape surrounding Crest Tower;

(vi) all common areas/property within Crest Tower; and

(vii) all common areas/property within the car park area of 3

Two Square.

(b) a declaration that the Defendants are under an obligation to

maintain all the common property within 3 Two Square under
the STA and BCPA, including the lifts, toilets in the common
area, central cooling tower in Crest Tower and the car parks;

(c) special damages;

(d) general damages for the breach of statutory and fiduciary duties
by the Defendants;

(e) interest at the rate of 5%; and

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(f) cost on solicitor client basis.

[10] The 1 st to 8 th Defendants in their Defence denied any breach of

their statutory or fiduciary duties. They further contended that:

(a) the chiller and cooling tower, the lifts and toilets in Crest Tower
do not form part of the common property in 3 Two Square
primarily because the benefit of these facilities accrue
exclusively to the Plaintiff and its tenants;

(b) the Plaintiff had agreed to contribute a higher management fee

to the Management Corporation in order to defray the costs of
the facilities under dispute or had agreed to bear the operating
and maintenance costs of such facilities, and hence it was
estopped from putting forward a position to the contrary;

(c) there was no legal requirement to obtain a special resolution of

the Management Corporation in general meeting before utilizing
the sinking fund; and

(d) the flooding and ponding issues in the basement carpark were
the result of defective works from the construction of 3 Two
Square and not the result of any failure by the Management
Corporation to properly maintain the common property.

[11] The 9 th Defendant denied liability on the basis that he was never
involved in any of the decisions undertaken by or on behalf of the
Management Corporation, which are the subject matter of this action.

[12] The 1 st to 8 th Defendants commenced third part action against

Yong Shang Ming who was a director of the Plaintiff, and who was
appointed to the management council of the Management Corporation
as a representative of the Plaintiff.

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Findings of the High Court

(i) Allegation of misuse of sinking fund without special

resolution

[13] The Learned High Court judge found that on a proper

construction of s. 46 of the STA, no special resolution was required
for the use or application of the sinking fund. Accordingly, the
Plaintiff’s claim for the repayment to the Management Corporation of
the monies utilized from the sinking fund for repair and maintenance
works was dismissed.

(ii) Maintenance of common property

[14] The learned High Court judge found that all facilities located
outside the parcels and which were capable of being used in common
by more than one parcel owner to be common property. These
included the cooling tower, toilets and lifts in Crest Tower. Hence,
the learned judge held that the Management Corporation had a duty
and responsibility to maintain such common property and made the
following orders:

(a) a mandatory injunction for the Management Corporation and its

council members for the time being to undertake the
maintenance and management of such common property;

(b) a declaration to the effect that the Management Corporation was

obligated to maintain all common property at 3 Two Square
including, without limitation, the lifts, the toilets and central
cooling tower at Crest Tower and the common property located
in the carpark.

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[15] In this regard, the learned High Court judge allowed the
Plaintiff’s claim for special damages in connection with the costs
incurred by the Plaintiff in maintaining the central cooling tower and
toilets in Crest Tower.

(iii) Personal liability of council members

[16] The learned High Court judge found that even though council
members owed a fiduciary duty to the Management Corporation and to
the proprietors as a whole, this duty is not owed to any individual
proprietor. Thus, the Plaintiff’s claim for breach of fiduciary duty
against the Defendants was dismissed.

[17] Further, on the facts, the High Court found that it was not
proven that the Defendants were personally liable to the Plaintiff for
the breach of statutory duties by the Management Corporation, and the
Plaintiff’s claim in this regard was dismissed.

(iv) Loss of rental

[18] The Plaintiff had several claims for loss of rental and the High
Court’s findings in respect of these claims are as follows:

(a) the Plaintiff failed to prove that the carpark flooding was
attributable to a failure by the Management Corporation to
maintain the carpark premises;

(b) the Plaintiff did prove that, on balance, there had been a failure
to maintain the lifts in Crest Tower to an acceptable standard,
and that this responsibility lay with the Management
Corporation;

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(c) one of the Plaintiff’s tenants, Novartis Corporation Malaysia

Sdn Bhd, had refused renewal of its tenancy due to the problems
associated with the flooded carpark and the frequent breakdown
of the lifts at Crest Tower and;

(d) the loss of Tune Talk as a tenant was not proven to be

attributable to the Defendants as the testimony on this issue was
merely hearsay.

[19] Based on these findings, the High Court held that the
Management Corporation was only partially responsible for the loss of
Novartis as a tenant, and determined its liability at 30% and allowed
the claim for special damages in part only.

[20] The following special damages were allowed:

(a) RM19,410.00 for the cost incurred by the Plaintiff in

maintaining the central cooling tower in Crest Tower;

(b) RM37,355.40 for the cost of maintaining the toilets in Crest

Tower;

(c) RM203,232.00 being 30% contribution of the Management

Corporation in respect of the Plaintiff’s loss of Novartis
Corporation Malaysia Sdn Bhd as its tenant; and

(d) RM15,390.00 being 30% contribution of the Management

Corporation in respect of the Plaintiff’s loss of rental income
from the carpark.

(v) General damages

[21] The High Court allowed the plaintiff’s claim for general
damages and directed that assessment be conducted to determine the
costs incurred by the Plaintiff in undertaking the rewiring of Crest

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Tower as well as the electricity charges incurred by the Plaintiff in

respect of the common property in Crest Tower.

(vi) Cost

[22] The High Court made the following order as to cost:

(i) RM250,000 for the Plaintiff against the Management

Corporation with a direction that this cost is to be paid out of a
special fund to be collected from among all the parcel owners
but excluding the Plaintiff;

(ii) RM75,000 for D9 against the Plaintiff; and

(iii) RM75,000 for the Third Party against the Management

Corporation with a direction that this cost is to be paid out of a
special fund to be collected from among all the parcel owners
but excluding the Plaintiff.

The Appeal

[23] Two appeals were filed. In Appeal No: W-02(NCVC)(W)-1457-

07/2017, the Appellant, i.e. the Management Corporation, appealed
against a part of the High Court’s decision, and in particular the
findings of the learned judge as regards what constitutes common
property and the maintenance thereof by the Management
Corporation, the relief granted in that respect as well as the order of
cost.

[24] In Appeal No: W-02(NCVC)(W)-1460-07/2017, the Appellant,

i.e. the Plaintiff, appealed against a part of the High Court’s decision,
and in particular the decision of the learned judge refusing a
declaration to the effect that the 2 nd to 9 th Defendants had misused the

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sinking fund and/or that the 2 nd to 9 t h Defendants personally owed a

fiduciary duty to the Plaintiff.

Our decision

[25] We heard both appeals together. We found no merit in Appeal

No: W02(NCVC)(W)-1460-07/2017 and dismissed it. Whereas for
Appeal No: W02(NCVC)(W)-1457-07/2017 we found merit in parts of
the appeal and accordingly allowed the appeal in part for reasons
stated below.

Reasons for our decision

(i) Common property

[26] The Plaintiff’s action was commenced prior to the coming into
force of the Strata Management Act 2013 on 1 June 2015. Hence, the
Strata Management Act 2013 will not apply to the determination as to
whether the areas and facilities in question, i.e. the central cooling
tower, lifts and toilets in Crest Tower, are common property. Instead,
that determination would have to be done by reference to the meaning
ascribed to “common property” in the STA.

[27] In the STA, common property is defined in s. 4 as follows:

“common property” means so much of the lot as is not

comprised in any parcel (including any accessory parcel), or any
provisional block as shown in an approved strata plan;

[28] Based on this definition and the evidence presented, the learned
High Court judge found that the cooling tower for the centralized air
conditioning system, the lifts and public toilets in Crest Tower were
common property. The evidence showed that the cooling tower was

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not located on any parcel belonging to the Plaintiff nor to any other
parcel owner. Further, learned counsel for 1 st to 8 th Defendants
conceded that the toilets adjacent to the lift lobbies on every floor in
Crest Tower were located in an area marked as “Lobi Lif” in the strata
plan, hence placing them outside the areas comprised in the parcels
belonging to the Plaintiff.

[29] Nevertheless, the 1 st to 8 th Defendants contended that the

relevant facilities were not common property on two grounds, namely:

(a) firstly, that the strata plan did not specifically identify the
relevant areas as common property, in that there was no
“common property” label affixed to these areas in the strata
plan; and

(b) secondly, that the central cooling tower, toilets and lifts in Crest
Tower were for the exclusive use of the Plaintiff and its tenants,
and as such they cannot be considered common property.

[30] On the first point, we find that the definition of “common

property” in s. 4 of the STA defines it by exclusion, that is, common
property is simply that which is not comprised in any parcel
(including any accessory parcel), or any provisional block as shown in
an approved strata plan. Hence, under s. 4 of the STA, by exclusion,
all those areas not comprised in or demarcated as parcels would be
common property. Thus, we agree that the central cooling tower, lifts
and public toilets in Crest Tower, which do not form part of the strata
parcels or any accessory parcel are common property. The fact that
these areas are not demarcated as common property in the strata plan
does not mean that they are not common property. After all any
demarcation on the strata plan would have been done by the Plaintiff
as the developer of 2 Two Square.

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[31] And on the exclusive use argument, we agree with the findings
of the learned High Court judge that even though the utility of these
facilities accrue substantially (even if not exclusively) to the
occupiers of Crest Tower, the cost of maintenance of such facilities
cannot be left to the Plaintiff as strata parcel owners in that tower
block. As these areas are common property, it would be the obligation
of the Management Corporation to maintain such property as set out
in section 43(1)(a) of the STA, which provides as follows:

(1) The duties of the management corporation include the

following:

(a) to manage and properly maintain the common property and

keep it in a state of good and serviceable repair;

[32] The issue of whether an area in a strata development is common

property cannot be construed by reference to its mere utility of these
areas/facilities to certain parcel owners. Nowhere is the concept of
exclusive or special use provided for in the STA. Maintenance charges
imposed on the parcel owners by the Management Corporation is for
the maintenance and management of all the common areas in the strata
development. Crest Tower is part and parcel of the 3 Two Square, and
it so happens that the Plaintiff owns all the strata units in Crest
Tower, but that does not mean that the Plaintiff as proprietor of all
strata parcel units in Crest Tower has to manage and maintain the
cooling tower, lifts and public toilets in Crest Tower or for that matter
any other common property in that tower block.

[33] The fact that the Plaintiff is the only proprietor of the strata
parcels in Crest Tower is simply a matter of circumstance. The
Plaintiff is at liberty to dispose any one or more of its parcels to any
third party. And if it does, the facilities in issue, such as the
centralized air-conditioning, as well as the lifts and toilets located at
Crest Tower would be capable of being used by these future owners in

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common with the Plaintiff, its employees, agents and tenants. In this
regard, we entirely agree with the learned High Court judge when he
held that:

“... the proper categorization of a facility as common property

cannot depend on the identity of the proprietor in question, as an
absurd result will arise if the facility is not considered common
property on one day (and thus need not be maintained by the
management corporation) but would be considered common
property once the proprietor sells one of his parcels to a third
party. It is well established that the court may favour an
interpretation of statute that does not lead to an absurd result:
see the dicta of Denning MR in Northman v. Barnett London
Borough Council, as applied by the Federal Court recently in
Kesatuan Pekerja-Pekerja Bukan Eksekutif Maybank Berhad v.
Kesatuan Kebangsaan Pekerja-Pekerja Bank & Anor [2017] 1
LNS 296.”

Hence, we are fully in accord with the learned trial judge’s finding
that the onus and responsibility for the maintenance and upkeep of
these facilities in Crest Tower rests with the Management
Corporation.

(ii) Alleged misuse of the sinking fund

[34] The Plaintiff contended that the Defendants had misused the
sinking fund of the Management Corporation in undertaking certain
maintenance and repair works at 3 Two Square. These works included
matters such as the installation of lift locking mechanisms,
installation of closed circuit television cameras, waterproofing works
and electric calibration works. The total cost of these works was
RM249,634.00. The Plaintiff contended that these expenditures were
not approved by a special resolution at a general meeting of the

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Management Corporation but were instead approved by the

management council at its weekly meetings. The Plaintiff, thus sought
an order that this sum of RM249,634.00 be repaid to the Management
Corporation by the 2 nd to 9 th Defendants. The Plaintiff relies on the
provisions of the then existing s. 46 of the STA to ground this
argument. Section 46 reads:

46. The management corporation shall maintain a special

account in which shall be paid such portion of the contribution
to the management fund as may be from time to time determined
under paragraph (ba) of subsection 41(5) by special resolution
for the purposes of meeting its actual or expected liabilities in
respect of the following matters:

(a) for painting or repainting any part of the common property

which is a building or other structure;

(b) for the acquisition of any movable property for use in

relation with the common property;

(c) for the renewal or replacement of any fixtures or fittings

comprised in any common property and any movable
property vested in the body corporate; and

(d) for any other expenditure not being expenditure incurred

under subsection 43(5) to meet a liability for maintenance
or for settling any defaults in payment by a proprietor.

[35] Section 41 of the STA referred to in section 46 reads:

Duty of original proprietor to convene first annual general

meeting

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41. (1) It shall be the duty of the original proprietor to convene

the first annual general meeting of the management corporation
within one month after the expiration of the initial period.

(2) If the original proprietor fails to comply with subsection

(1), he shall be guilty of an offence and shall be liable on
conviction to a fine not exceeding one thousand ringgit.

(3) Without prejudice to subsections (1) and (2), if the original

proprietor fails to convene the first annual general meeting
within the specified period, the Director may, on application by
the management corporation, a proprietor or chargee of a parcel,
appoint a person to convene the first annual general meeting of
the management corporation within such time as may be
specified by the Director.

(4) The original proprietor shall give a written notice of the

first annual general meeting to all parcel proprietors constituting
the management corporation not less than fourteen days before
the meeting.

(5) The agenda for the first annual general meeting shall
include the following matters:

(a) to decide whether to confirm, vary or extend insurances

effected by the management corporation;

(b) to decide whether to confirm or vary any amounts

determined as contributions to the management fund;

(ba) to determine the portion of contribution to the management

fund to be paid into the special account to be maintained
under section 46;

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(c) to determine the number of members of the council and to

elect the council where there are more than three
proprietors; and

(d) to decide whether to amend, add to or repeal the by-laws in

force immediately before the holding of the meeting.

[36] We agree with the decision of the learned trial judge that based
on a proper construct of s. 46 of the STA (which was then in force and
has since been repealed by the Strata Titles (Amendment) Act 2013
with effect from 1.6.2015), a special resolution is only required to
determine the portion of the management fee contribution that is to be
applied to the special account, and not for any use of the funds in the
special account to defray expenses. Hence, we agree that once the
proportion of the management fee to be contributed by the parcel
owners to the special account has been determined by special
resolution, the Management Corporation, and by extension the
management council, would be free to utilize the sinking fund in any
manner it considers fit and proper, so long as the purposes for which
it is utilized comes within the matters specified in sub-paragraphs (a)
to (d) of s. 46 of the STA. No special resolution is required for the
utilization of funds in the special account to defray expenses
stipulated in s. 46 of the STA, for none is stipulated in the STA.

[37] In any event, the evidence shows that the use of the sinking fund
for the purposes that the Plaintiff complains had been approved by the
Management Corporation at its third annual general meeting held on
14.9.2013, where the details regarding the usage of the sinking fund
had been included in the accounts that was tabled at the said general
meeting. The general body at the third general meeting had approved
the said accounts. Hence, there is ratification of these expenses by the
general body.

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[38] Thus, we find that the learned High Court judge was correct in
rejecting this claim for the sum of RM249,634.00 be repaid to the
Management Corporation by the 2 nd to 9 th Defendants for there is no
breach of any fiduciary duty as alleged.

[39] Corollary to that finding is that the issue of the 2 nd to 9 th

Defendants being personally liable to the Plaintiff to reimburse the
expenses defrayed for the installation of lift locking mechanisms,
installation of closed circuit television cameras, waterproofing works
and electric calibration works using the funds in the special account
does not arise for consideration.

(iii) Extent of Statutory and Fiduciary Duties by Council Members

[40] The Plaintiff, in its pursued relief, has not only sought to make
the Management Corporation liable in respect of its failure to
maintain the common property, but has also sought to make the
council members, i.e. the 2 nd to 9 th Defendants, personally liable to
the Plaintiff. The question that arises then is this. What is the extent
of the duty that is owed by the council members to the Management
Corporation and to the parcel proprietors? The enabling legislation,
i.e. the STA, does not provide a direct answer as it does not
specifically provide for the scope and extent of the duties of council
members.

[41] Section 39(4) of the STA provides that:

The management corporation shall elect a council which, subject

to any restriction imposed or direction given by the management
corporation at a general meeting, shall perform the management
corporation’s duties and conduct the management corporation’s
business on its behalf, and may for that purpose exercise any of
the management corporation’s powers.

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The Second Schedule to the STA provided for matters such as the
constitution of the council and proceedings of council meetings. Other
than that, the enabling legislation, i.e. the STA, does not specifically
provide for the scope and extent of the duties of council members.

[42] A dearth of legal precedent in Malaysia on the question of

whether the council members of a management corporation
established pursuant to the STA owe a fiduciary duty to the
corporation has prompted us to consider judicial pronouncements in
other jurisdictions. We find these are highly persuasive as they are
based on strata management laws that are somewhat similar. In
Australia, for example, fiduciary duty of executive committee
members of a corporation that manages strata property have been held
to be co-extensive with that of directors of companies. The Court of
Appeal of New South Wales in 2 Elizabeth Bay Road Pty Ltd v. The
Owners - Strata Plan No 73943 [2014] NSWCA 409 held:

The analogy with a board of directors of a company is clear but

incomplete. While members of the executive committee no doubt
owe a fiduciary and other general duties to their company, the
executive committee is not the repository of powers and
functions distinct from those exercisable by the owners
corporation through the action of its corporators assembled at a
meeting. The two decision-making bodies have corresponding
decision-making powers, except to the extent that matters
expressly put by the legislation within the province of the
owners corporation in general meeting (or that a general meeting
has reserved exclusively to itself) are, by s. 21(2) excluded from
the authority of the executive committee.

[43] Similarly, the Supreme Court of New South Wales in Re Steel

and the Conveyancing (Strata Titles) Act 1961 [1968] 88 WN Pt 1 467

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in construing the duties of council members of a strata management

corporation held that:

Such persons are at least in a position analogous to company

directors; they may even have a higher fiduciary duty, and when
they are promoters as well this duty has a dual basis. It is plain
that the respondents have failed to recognize that it is their duty
to manage the affairs of the body corporate for the benefit of all
the lot holders, and that the exercise of any of their powers in
circumstance which might suggest a conflict of interest and duty
requires them to justify their conduct, and that the onus lies on
them to prove affirmatively that they have not acted in their own
interests or for their own benefit.

[44] We do not see any reason to depart from the legal reasoning in
the above pronouncements of the courts of New South Wales or hold
otherwise. The duties of the members of the management council are
analogous to those of directors of companies, with a slight variance in
that the management of companies would be vested in the board of
directors specifically by the general meeting of the members, whilst in
an owners corporation of a strata development whatever powers that
may be exercised by the management corporation in general meeting
may be exercised by the management council, and vice versa. The
exception being specific matters that by statute must be exercised by
the management corporation in general meeting.

[45] Hence, we state the law to be thus, that is, that the council
members of a management corporation owe a duty of fiduciary and
good faith and care to the corporation similar to those owed by
directors of a company. Such a duty requires them not to allow any
conflict to arise between their duty to the corporation and their own
personal interests. The duty is to be discharged with such care as an
ordinary prudent person in a like position would use under similar

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circumstances. And when it is discharged as such, council members

may not be held liable for decisions that were fairly and reasonably
made, even if it turned out to be wrong in hindsight. This is often
referred to as the ‘business judgment rule’ and it protects council
members if it can be established that they have acted in good faith
taking into account all the factors surrounding the matter and that they
personally believed the decision arrived at was made in the best
interest of the condominium owners and the management corporation
as a whole.

[46] This principle was recognized and applied by the Ontario Court
of Appeal in 3716724 Canada Inc v. Carleton Condominium
Corporation No 375, 2016 ONCA 650 in the following terms:

[50] While the business judgment rule was developed in the

context of for-profit businesses, it has been applied to not-for-
profit corporations as well: see, for example, Hadjar v. Homes
First Society, 2010 ONSC 1589, 70 B.L.R (4 th ) 101, at paras.
47-52. And courts in other jurisdictions have applied the rule
when reviewing decisions rendered by condominium boards: see,
for example, Yusin v. Saddle Lakes Home Owners Ass’n, 73
A.D. 3d 1168 (N.Y. App. Div. 2010); and Black v. Fox Hills N.
Cmty. Ass’n, 599 A.2d 1228 (Md. Ct. Spec. App. 1992).

[51] Moreover, the rationale underlying the business judgment

rule in the corporate law context is also applicable to
condominium corporations. As representatives elected by the
unit owners, the directors of these corporations are better placed
to make judgments about their interests and to balance the
competing interests engaged than are the courts. For instance, in
this case the security concerns arose in part as a result of the
condominium’s location, and the Board members’ knowledge of

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that area is clearly an advantage that they enjoy over any court
subsequently reviewing their decision.

[52] The Act provides that the directors are the ones
responsible for managing the affairs of a condominium
corporation: s. 27(1). They are also required to act honestly and
in good faith, and to exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable
circumstances: s. 37(1). Like their counterparts in corporate
statutes, these provisions suggest that courts should be careful
not to usurp the functions of the boards of condominium
corporations.

[47] The position in Malaysia is not very different. Unlike a company

established under the Companies Act 1965 (or its replacement
Companies Act 2016) to pursue a particular venture or economic
activity, a management corporation of a strata development
established under s. 39(1) of the STA has a statutory non-commercial
purpose. The management corporation exists as a repository of rights
that are common to all the parcel proprietors. Though strata parcel
proprietors do not have direct ownership rights over common
property, they have an usufruct over it. This is provided in s. 34(1)(b)
of the STA that reads:

(1) Subject to this section and other provisions of this Act, a

proprietor shall have-

... ...

(b) in relation to the common property, the right of user which

he would have if he and the other proprietors were co-
proprietors thereof.

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In this regard, the main responsibility of a management corporation,

as spelt out in s. 43(1) of the STA, is to manage and maintain the
common property in the strata development and keep them in a state
of good and serviceable repair for and on behalf of the parcel owners.
Hence, the duty of the management corporation under s. 43(1) of the
STA is owed to all proprietors collectively, as co-proprietors of the
common property.

[48] In this regard, we concur with the observation of the learned

High Court judge that the management corporation would act
primarily through the council and any individual council members to
whom a power or duty may have been delegated in accordance with
item 5 of the Second Schedule, as well as any person who is employed
as an agent or servant of the corporation pursuant to item 6 of the
same Schedule. Accordingly, we find that the council’s duty and that
of the individual council members, like that of the management
corporation, must necessarily be owed to all the proprietors
collectively.

[49] The Plaintiff sought to make the council members. i.e. the 2 nd to
9 th Defendants personally liable to the Plaintiff for their alleged
breach of fiduciary duties. Firstly, we find that on the facts there is no
breach of fiduciary duty by the Defendants, and thus, the personal
liability of the 2 nd to 9 th Defendants does not arise. Secondly, for
reasons discussed earlier, the fiduciary duty of council members is
owed to the management corporation and the parcel owners
collectively and not to individual parcel owners. Hence, the learned
High Court judge had correctly dismissed this aspect of the Plaintiff’s
claim.

(iv) Breach of statutory duty

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[50] The principle is that the council members, in carrying out the
duties and functions of the management corporation as provided in the
STA, are required to act in the best interest of the management
corporation and all the proprietors. And so long as council members
act in good faith and in the best interest of the proprietors as a whole,
no personal liability will arise in connection with the exercise of any
duty or function of the management corporation. The question then
that arises for consideration is whether a case has been made out by
the Plaintiff for breaches of statutory duty by the 2 nd to 9 th Defendants
arising from improper or mala fide exercise of their powers or wilful
failure to discharge their duties and responsibilities.

[51] The uncontroverted evidence shows that the Plaintiff as

developer had originally managed and maintained 3 Two Square.
Subsequently, with the establishment of the joint management body,
the Plaintiff was appointed as the managing agent and continued to
maintain and manage the strata development. This arrangement
continued even after the formation of the Management Corporation in
2009. In July 2012, the Plaintiff’s appointment as the managing agent
was terminated and was replaced by an independent firm of property
managers, Clements Management Sdn Bhd (“Clements”).

[52] The managing director of Clements, Mr Wong Kim Hiong

testified to the effect that upon assuming the role of managing agent,
he found that about 40% of the total maintenance charges collected
from the strata proprietors went towards defraying electricity charges
incurred in maintaining the common property and the facilities
therein, including the central cooling tower. This percentage of
expenditure, according to Mr Wong, was abnormal. Mr Wong advised
the Management Corporation, and its council members, that the chiller
and cooling tower used for the centralized air-conditioning system in
Crest Tower did not form a part of the common property on grounds
of exclusivity of use by the Plaintiff. The Management Corporation,

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acting upon the advice of Mr Wong, terminated the services of the

maintenance service provider for the Crest Tower centralized air
conditioning in January 2013. Since then, the Plaintiff had been
maintaining the chiller and cooling tower at its own cost. A resolution
was also passed in a general meeting of the Management Corporation
to compel the Plaintiff to install its own electricity sub-meter at Crest
Tower, effectively requiring the Plaintiff to pay the operating costs of
the central air-conditioning system.

[53] In hindsight, for reasons discussed earlier, that decision was

plainly wrong, as the chiller and cooling tower was common facility
placed on common property, that fell squarely within the area of
responsibility of the Management Corporation to maintain and
manage. However, we agree with the learned High Court judge that
there was insufficient evidence to show that the council members had
acted other than in good faith and their honest belief that the decision
was in the best interest of all the strata owners. The council members
had acted on the advice of their managing agent, and made that
decision thinking that it was in the best interest of the proprietors as a
whole. The council members’ decision was prompted in part by their
view that the rest of the proprietors, i.e. other than the Plaintiff, were
paying for an utility from which they did not derive any benefit. This
seems to have somewhat coloured their decision causing the
Management Corporation to act in breach of its statutory obligations.
However, that does not mean that the 2 nd to 8 th Defendants had acted
dishonestly or in blatant disregard of their duties. The evidence
supports the 2 nd to 8 th Defendants’ contention that they had acted
honestly in what they considered to be in the best interest of the
proprietors as a whole.

(v) Claim for loss of rental & carpark income

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[54] The Plaintiff claimed damages for the loss of rental income
arising from the loss of a tenant and another potential tenant. The
Plaintiff attributed this loss to the failure of the Defendants to
adequately maintain the carpark common areas to avoid flooding and
the failure of the Defendants to properly maintain the lifts in Crest
Tower.

[55] Now, as for the carpark, it was common ground that the
basement carpark was prone to flooding. The carpark was owned by
the Plaintiff but the driveways in the carpark and all other areas
between the carpark lots were common property that came within the
purview of the Management Corporation. The Plaintiff contended that
the flooding in the carpark was the result of inadequate maintenance
by the Management Corporation, including the sump pumps located in
the carpark. Whilst, the Defendants contended that the cause of
flooding was a result of defective construction works and not
maintenance failure. In this regard, evidence was led to show that the
Plaintiff had sued the waterproofing specialist contractor who had
carried out the waterproofing works at the basement carpark for
defective works. A consent judgment was entered into between the
Plaintiff and the waterproofing specialist; subsequent to which,
further waterproofing works were carried out in the basement carpark
by the waterproofing specialist. Based on the overall evidence, the
learned High Court judge had found that the Plaintiff had failed to
prove that the carpark flooding was attributable to inadequate
maintenance by the Management Corporation. We do not find any
reason to disagree with that finding.

[56] As for the lifts, the learned High Court judge was correct to find
that they were part of the common property and that the responsibility
to maintain them rested with the Management Corporation. The
question then is whether the Management Corporation had undertaken
adequate maintenance of the lifts. The learned trial judge had, based

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on an evaluation of the evidence, found that the lifts in Crest Tower

had not been maintained to a reasonable or even adequate standard.

[57] An appellate court does not readily interfere with findings of

facts made by the trial court unless the trial judge had fundamentally
misdirected himself, such that one may safely say that no reasonable
court would have arrived at the same conclusion if it had properly
directed itself and asked the correct questions. See, for example, Gan
Yook Chin (P) & Anor v. Lee Ing Chin @ Lee Teck Seng & Ors [2005]
2 MLJ 1; Sivalingam a/l Periasamy v. Periasamy & Anor [1995] 3
MLJ 395.

[58] We have, with the above principles in mind, examined the

grounds of judgment of the learned High Court judge and found that
the conclusion reached by him as regards the adequacy of
maintenance of the lifts is unsupported by evidence, and in fact the
evidence supports the Defendants’ contention that they carried out
proper and regular maintenance of the lifts at Crest Tower.

[59] There had been several incidence of the lifts malfunctioning and
getting stuck or overshooting the floor. This included an incident
where an employee of a tenant at Crest Tower had when entering the
lift car suffered injuries by falling into the lift compartment as a
result of it having stopped well below the level of the floor. The
Management Corporation had attended to these complaints and
ensured that the lifts were regularly maintained. The Defendants had
adduced documentary evidence showing that the Management
Corporation had engaged Sigma Elevator (M) Sdn Bhd to undertake
regular servicing and maintenance of the lifts at Crest Tower. Sigma
Elevator was also engaged to be on standby during peak hours
between the hours of 7.30 - 8.30 am and 5.30-6.30 pm in March 2014
in order to address any issues relating to the lifts malfunctioning. As
for the safety of the lifts, the Defendants adduced the Certificate of

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Fitness issued by the Jabatan Keselamatan dan Kesihatan Perkerjaan,

the government regulatory body, to show that the lifts had undergone
regular regulatory inspections and that the safety equipment employed
in the lifts were in good working order. The Management Corporation
had also attended to improving the functionality and safety of the lifts
by the installation of the lift locking mechanisms utilising funds from
the special account, which was objected to by the Plaintiff and
became part of the claim herein.

[60] When the totality of the evidence is considered, we find that the
Management Corporation and the council members have done all that
they could possibly have done to properly maintain and upkeep the
functionality and safety of the lifts in Crest Tower. There is no
evidence indicating that the Defendants could have done something
more to attend to the Plaintiff’s complaint. The 2 nd to 9 th Defendants
are lay persons who had volunteered their services to carry out the
duties and responsibilities of the Management Corporation. In so far
as the lifts are concerned, they would have to act in accordance to the
professional advice of the managing agent, Clements, and the
technical advice of the elevator systems experts, in this case Sigma
Elevator. It is not as if the Defendants had disregarded professional
and technical advice leading to the lifts not functioning properly.

[61] We found that the evidence shows that the Defendants had done
all that they could possibly have done in respect of the problems
associated with the lifts. In this regard, we found that the learned trial
judge had failed to properly evaluate the evidence and correctly apply
the law to the facts. The evidence does not support the learned judge’s
finding that the Defendants had breached their statutory duty by
failing to adequately maintain the lifts in Crest Tower. This, with due
respect, is an appealable error on the part of the learned trial judge.
Thus, we have allowed the appeal by the Defendants’ in this regard.

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[62] The trial court had awarded damages to the Plaintiff (on the
basis of the Defendants being 30% liable):

(i) in the sum of RM203,232.00 against the Management

Corporation for losses incurred by the refusal by the Plaintiff’s
tenant, Novartis Corporation Malaysia Sdn Bhd, to renew its
tenancy ostensibly for reasons associated with the flooding of
the carpark and the frequent breakdown of the lifts;

(ii) the sum of RM15,390.00 as contribution by the Management

Corporation for the loss of income from the carpark operations
by the Plaintiff.

Following our finding that the Defendants have not breached their
statutory duty in respect of the maintenance of the lifts in Crest Tower
and further by reason of the trial judge’s finding that the flooding of
the basement carpark has no causal nexus between the alleged loss
suffered by the Plaintiff and the Defendants’ discharge of their
statutory duties, we found that the finding of 30% culpability on the
part of the Management Corporation in these regard, and the award of
the sum of RM203,232.00 and the sum of RM15,390.00 as damages is
a clear misdirection that warrants appellate intervention. Accordingly,
we set aside the award of damages as ordered by the High Court in
paragraphs 4(c) and (d) of the Order dated 22.6.2017.

(vi) Order for assessment of general damages

[63] The Plaintiff had in its pleadings, i.e. prayer (5) of the Amended
Statement of Claim had claimed reliefs for:

“Ganti rugi bagi pemecahan tugas statutory dan fiduciary oleh

Defendan-Defendan.”

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Thus, the Plaintiff’s claim for general damages was limited to that
arising from the Defendants’ breaches of their statutory and fiduciary
duties. However, the learned trial judge had made the following order
in respect of the claim for general damages:

“5. Ganti rugi am bagi pemecahan tugas statutory dan fidusiari

oleh Plaintif

terhadap Defendan Kedua sehingga Defendan Kesembilan adalah

ditolak;

...

7. Tuntutan ganti rugi am Plaintif dibenarkan dengan

tertakluk kepada pentaksiran ganti rugi oleh Hakim untuk
tanggungan kerja-kerja pendawaian semula (“re-wiring”) Crest
Tower, bil-bil elektrik yang ditanggung oleh Plaintif bagi
Kawasan bersama di Crest Tower dan kos-kos penyelenggaraan
tandas-tandas di Crest Tower oleh Plaintif yang masih
berterusan;

[64] Whilst dismissing the Plaintiff’s claim for general damages

arising from breaches of statutory and fiduciary duties, the learned
trial judge had ordered general damages to be assessed for matters
that were not specifically pleaded. In paragraph (7) of the Order, the
learned judge had ordered assessment of damages for the cost of re-
wiring, electricity bills and the cost of maintenance of the toilets in
Crest Tower. However, the claim for general damages in the pleadings
was limited for breach of statutory and fiduciary duties. We found the
order for assessment of general damages made by the learned judge
was not in accord with the pleaded relief as it relates to matters
beyond the allegations of breach of statutory or fiduciary duties. In
fact, there is already an award of special damages for the cost of
maintenance of the chiller and cooling tower and public toilets, with

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an ancillary order for the assessment of any continuing cost and

expense incurred by the Plaintiff in these regard (see paragraphs 4(a)
and (b) of the Order). Therefore, we found the award of general
damages for the cost of re-wiring, electricity bills for the cooling
tower and the cost of maintenance of the toilets in Crest Tower to be
beyond the Plaintiff’s pleadings and unsustainable. If the Plaintiff had
in fact incurred such cost and expense, it could have proved it at trial
and claimed it. Hence, we found that there was no basis in law for the
order of assessment of general damages and accordingly set-aside
paragraph (7) of the Order.

(vi) Cost

[63] The learned High Court judge had made the following orders as
to cost:

(a) the sum of RM250,000.00 be paid by the Management

Corporation to the Plaintiff, which amount is to be paid out from
a special fund where contributions are collected from all parcel
owners in 3 Two Square with the exception of the Plaintiff;

(b) the sum of RM75,000.00 be paid by the Plaintiff to the 9 th

Defendant; and

(c) the sum of RM75,000.00 be paid by the Management

Corporation to the Third Party, which amount is to be paid out
from a special fund where contributions are collected from all
parcel owners in 3 Two Square with the exception of the
Plaintiff.

[64] Though s. 78 of the STA permitted the court to make an order

that a successful plaintiff in a claim against the management
corporation need not contribute to costs awarded to plaintiff, it had
been repealed at the time the judgment was pronounced. And, with the

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repeal of s. 78 of the STA, the Strata Management Act 2013 (“SMA”)

governed any order of cost to be made in this case. The applicable
section would be s. 143(4)(a) of the SMA. However, the learned judge
had departed from a literal reading of s. 143(4)(a) of the SMA and
made the order of cost as he did on grounds that a literal
interpretation of that section would bring an absurd result. Be that as
it may, since the Plaintiff was only partially successful in its claim
and failed in its appeal; and the Defendants had partially succeeded in
their appeal, we found that a more equitable order for cost would be
for all parties to bear their own cost here and below. Therefore, the
order of cost made by the High Court was set aside and substituted
with an order that cost be borne by the respective parties here and
below.

[65] In the premise of the above, the Plaintiff’s appeal in Appeal No:
W02(NCVC)(W)-1460-07/2017 was dismissed and the Management
Corporation’s appeal in Appeal No: W-02(NCVC)(W)-1457-07/2017
was allowed in part, as explained above.

Orders accordingly.

Dated: 27 DECEMBER 2019

(VAZEER ALAM MYDIN MEERA)

Judge
Court of Appeal

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COUNSEL:

Appeal No: W-02(NCVC)(W)-1457-07/2017

For the appellant - David Samuel, L S Leonard & Savrena Kaur; M/s
Chambers of Firdaus
Peguambela dan Peguamcara
Unit No.J-5-1, 5th Floor, Parklane Commercial Hub
Jalan SS 7/26, Kelana Jaya, 47301 Petaling Jaya
Selangor Darul Ehsan. Tel : 7887 5360

For the respondent - Christie Soosay Nathan; M/s Christie Soosay

Nathan & Associates
J-5-11, No.2 Jalan Solaris, Mont Kiara,
50480 Kuala Lumpur Tel : 7968 8288

For the respondent - Celine Chelladurai, Oommen Kurien, HH Jee &

Tan Wei Li; M/S Tho, Hock & Chwan
Lot 5.21, 5th Floor, Plaza Prima
Jalan Kelang Lama, 58200 Kuala Lumpur

Appeal No: W-02(NCVC)(W)-1460-07/2017

For the appellant - Celine Chelladurai, Oommen Kurien, HH Jee &

Tan Wei Li; M/S Tho, Hock & Chwan
Lot 5.21, 5th Floor, Plaza Prima
Jalan Kelang Lama, 58200 Kuala Lumpur

For the respondent - David Samuel, L S Leonard & Savrena Kaur;

M/s Chambers of Firdaus
Peguambela dan Peguamcara
Unit No. J-5-1, 5th Floor, Parklane Commercial Hub
Jalan SS 7/26, Kelana Jaya, 47301 Petaling Jaya
Selangor Darul Ehsan. Tel : 7887 5360

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Case(s) referred to:

2 Elizabeth Bay Road Pty Ltd v. The Owners - Strata Plan No 73943
[2014] NSWCA 409

Re Steel and the Conveyancing (Strata Titles) Act 1961 [1968] 88 WN

Pt 1 467

Gan Yook Chin (P) & Anor v. Lee Ing Chin @ Lee Teck Seng & Ors
[2005] 2 MLJ 1

Sivalingam a/l Periasamy v. Periasamy & Anor [1995] 3 MLJ 395

Legislation referred to:

Strata Titles Act 1985, ss. 4, 34(1)(b), 39(4), 41, 43(1)(a), 46, 78

Strata Management Act 2013, s. 143(4)(a)